Motorola plots 2011 breakup
Motorola will split into two companies in the first quarter of 2011: one focusing on mobile phones and television set-top boxes, the other concentrating on enterprise networking.
The company claims that splitting into two independent and publicly traded companies would help improve its position in the different markets.
The company’s money-losing mobile devices unit has been struggling to compete with new smartphones, and has not had a blockbuster since the Razr, although its Droid phone reportedly sold between 100,000 and 250,000 units in its first week.
Its set-top box business had also suffered due to a weak economy, while its wireless network-equipment business had been hit by a consolidation among telecom operators.
It’s hard to work with a company when you don’t know where they’ll be a year from now. So this removes uncertainty
“It’s hard to work with a company when you don’t know where they’ll be a year from now. So this removes uncertainty,” says Broadpoint Gleacher analyst Mark McKechnie. “I do think the smaller divisions can offer some operational efficiency and focus.”
Motorola’s latest financial results show its mobile phone business had revenue of $7 billion for 2009. The enterprise wireless business had revenue of $2 billion while home and network sales brought in another $2 billion.
“We believe that as independent companies each business will be best positioned to successfully pursue the respective strategies and opportunities for growth,” says Greg Brown, who was co-chief executive officer of Motorola and will now become CEO of the enterprise mobility and networking business.
Sanjay Jha, the company’s other CEO, will head the mobile devices and home business.
The enterprise and network equipment business will be the entity responsible for Motorola’s current public debt and will be capitalised to achieve an investment grade rating.
Both companies will use the Motorola brand. Additional details including the capital structure of the companies will be announced later.
Jha said that the combination of businesses dealing with mobile phones, cable set-top boxes and other home entertainment devices was ideal to meet consumers’ demands for “converged” or seamless access to television, phone and internet.
The company reiterated that it planned to make the mobile device business profitable in 2010.